Ever since a bunch of sharp MBAs armed with their spreadsheets determined that deep cuts in direct labor costs could be gained through chasing low wage geographies, a reaction set in to convince companies and the US government that shipping jobs overseas was bad economics and bad for the economy.
A chunk of my responsibilities for several years in a manufacturing firm was analyzing and recommending ways to cut costs. I didn’t have responsibilities on the growing revenue side of the equation; rather I was charged with helping boost profitability through cutting direct costs. By the way, back then cutting labor cost wasn’t worth the effort.
I have had conversations for several years with The Reshoring Initiative. A 50-year manufacturing industry veteran and retired President of GF AgieCharmilles, Harry Moser founded the Reshoring Initiative to move lost jobs back to the U.S. For his efforts with the Reshoring Initiative, he was named to Industry Week magazine’s Manufacturing Hall of Fame in 2010..
The Reshoring Initiative’s 2018 Reshoring Report contains data on U.S. reshoring and foreign direct investment (FDI) by companies that have shifted production or sourcing from offshore to the United States. The report includes cumulative data from 2010 through 2018, as well as projections for 2019. The numbers demonstrate that reshoring and FDI are major contributing factors to the country’s rebounding manufacturing sector.
“We publish this data annually to show companies that their peers are successfully reshoring and that they should reevaluate their sourcing and siting decisions,” said Harry Moser, founder and president of the Reshoring Initiative. “With 5 million manufacturing jobs still offshore, as measured by our $800 billion/year goods trade deficit, there is potential for much more growth. We call on the administration and Congress to enact policy changes to make the United States competitive again. Our Competitiveness Toolkit is available to help quantify the impact of policy alternatives, including a stronger skilled workforce, continued corporate tax and regulatory reductions as well as a lower U.S. dollar.”
In 2018 the number of companies reporting new reshoring and foreign direct investment (FDI) was up 38% from 2017. The combined reshoring and related FDI announcements totaled over 145,000 jobs. Including upward revisions of 36,000 jobs in prior years, the total number of manufacturing jobs brought to the United States from offshore is over 757,000 since the manufacturing employment low of 2010.
Allowing for a two-year lag from announcement to hire, the cumulative announcements since 2010 have driven 31% of the total increase in U.S. manufacturing jobs during that period and 3.3% of total end-of-2018 manufacturing employment of 12.8 million.
The Reshoring Initiative largely attributes the increases to greater U.S. competitiveness due to corporate tax and regulatory cuts. Similar to the previous few years, FDI continued to exceed reshoring in terms of total jobs added, but reshoring has closed most of the gap since 2015.
Although China topped Germany for the greatest number of FDI jobs announced since 2010, China announced 12% fewer in 2018 than in 2017. I’m betting that 2019 will see a greater decline given the current trade war unless something works out.
Quality, freight cost, and total cost make up the top offshore drivers of the trend.
Proximity to market, government incentives, supply chain optimization, higher productivity, skilled workforce, and brand image/made in USA serve as the top domestic drivers.
Reshoring has been increasing at a similar rate as FDI, indicating that U.S. headquartered companies are starting to understand the U.S. production benefit that foreign companies have seen for the last few years.
Today’s big enterprise IT news concerns Hewlett Packard Enterprise (HPE) and Cray entering into a definitive agreement under which HPE will acquire Cray for $35.00 per share in cash, in a transaction valued at approximately $1.3 billion, net of cash.
This is another example of technology industry consolidation. We’re seeing it with instrumentation, control, and automation companies. Enterprise IT is rapidly going that way. Both HPE and Dell Technologies have been scarfing up companies either matured and not growing or in need of capital to survive.
Signs of maturing industries mean one kind of shock waves for employment within them. But also this usually means preparing room in the market for new companies with disruptive new technologies and business models. It’s possible that we’re about to see a leap in quantum computing out of all this.
What does this mean for industrial users? We are seeing already companies like HPE moving their powerful compute platforms to the edge. With every advancement, we’ll see additional compute power bringing databases, analytics, AI, video and other applications to more remote installations.
Some additional details from the press release:
“Answers to some of society’s most pressing challenges are buried in massive amounts of data,” said Antonio Neri, President and CEO, HPE. “Only by processing and analyzing this data will we be able to unlock the answers to critical challenges across medicine, climate change, space and more. Cray is a global technology leader in supercomputing and shares our deep commitment to innovation. By combining our world-class teams and technology, we will have the opportunity to drive the next generation of high performance computing and play an important part in advancing the way people live and work.”
The Explosion of Data is Driving Strong HPC Growth
The explosion of data from artificial intelligence, machine learning, and big data analytics and evolving customer needs for data-intensive workloads are driving a significant expansion in HPC.
Over the next three years the HPC segment of the market and associated storage and services is expected to grow from approximately $28 billion in 2018 to approximately $35 billion in 2021, a compound annual growth rate of approximately 9 percent. Exascale is a growing segment of overall HPC opportunities and more than $4 billion of Exascale opportunities are expected to be awarded over the next five years.
“This is an amazing opportunity to bring together Cray’s leading-edge technology and HPE’s wide reach and deep product portfolio, providing customers of all sizes with integrated solutions and unique supercomputing technology to address the full spectrum of their data-intensive needs,” said Peter Ungaro, President and CEO of Cray. “HPE and Cray share a commitment to customer-centric innovation and a vision to create the global leader for the future of high performance computing and AI. On behalf of the Cray Board of Directors, we are pleased to have reached an agreement that we believe maximizes value and are excited for the opportunities that this unique combination will create for both our employees and our customers.”
High performance computing is a key component of HPE’s vision and growth strategy and the company currently offers world-class HPC solutions, including HPE Apollo and SGI, to customers worldwide. This portfolio will be further strengthened by leveraging Cray’s foundational technologies and adding complementary solutions. The combined company will also reach a broader set of end markets, offering enterprise, academic and government customers a broad range of solutions and deep expertise to solve their most complex problems. Together, HPE and Cray will have enhanced opportunities for growth and the integrated platform, scale and resources to lead the Exascale era of high performance computing.
There are linchpins; and there are cogs.
I’m not talking mechanics. It’s about people.
Some people fit in. They find their place in an organization or team. They do the quiet, repetitious work. Work that can eventually be replaced by artificial intelligence (AI). Or by robots.
Humans have a brain. Organizations, teams, companies need people who use their brains. They become vital to the cause. They are linchpins.
I’ve had very few mentors in the flesh. But I’ve had many mentors through the books they wrote. Seth Godin has become one of my mentors. He wrote the book on Linchpins.
Go find a way to make yourself valuable. Make a difference wherever you are. Don’t be replaced by AI.
If you keep butting against walls where you are, leave. Find a place where you can make a difference.
Another of Seth’s phrases applies–Go raise a ruckus!
I bring this up by way of introducing a way that many of you can raise a ruckus and raise your value. It’s called contributing to open source projects. These project contribute greatly to the advancement of the state of the art in many areas. The poster child, of course, is Linux. But there are many more.
Last week I wrote about an open source project that was the subject of a press release from one of the contributing companies concerning OPC UA over TSN. From the news release, it sounded promising. I went to the Web sites of the company–a software firm in India–and also the sponsoring organization–Open Source Automation Development Lab.
It all looked interesting, even though I had not heard of either one before.
A twitter conversation ensued with a reader who really dives into these projects. Turns out to be not so hot. The OSADL does not use GitHub–today’s standard repository for open source development. It has a few projects, some of which have not been updated since 2008. Nothing appears usable at this point.
I reviewed the companies involved in this project and in the OSADL generally. None seem to be taking a deep dive.
I know that the OPC Foundation has a new working group for Field Device communication of OPC UA over TSN. It has just organized as of a few months ago. I’m waiting for response from the working group leader for an update.
I’m also on a Facebook group concerning open source OPC UA. It has occasional conversations.
Maybe someone can raise a ruckus by prodding this German group OSADL to move to GitHub and grow. OPC Foundation is OK, but groups like that take a long time for specifications given the jockeying of various member companies to assure that each does not lose any competitive advantage when the standard if finalized. (Sorry, I had personal experience on these things, including having been chair of one once.)
And, I apologize for taking the shortcut with the press release on OSADL rather than exploring a little more deeply. Thanks to my reader who did.
Let me know if you see anything on the horizon.
I just received my Spectrum invoice for the month. It was up 15% over last month. Last month it was up 10% over the month before. I called. The guy told me, yes, and it will increase another 15% next year.
However, if I were a new customer, I’d receive a 30% discount. I said, if I quit and come back, then I’d reduce my bill. But, I’d have to go 30 days without cable. I said, that must be why I’m seeing so many signs popping up all over my neighborhood proclaiming a switch from Spectrum to the only competitor in town.
The cable TV business is tough these days. Therefore, consolidation is not surprising. Spectrum (Century) acquired Time Warner Cable. So, they raise rates to pay for the acquisition. In the end, consolidation does not benefit the customer with lower costs.
Unfortunately for them, there is another alternative. I can keep the Internet cable connection, which isn’t bad, and drop the phone (who needs “land line” anymore anyway) and drop TV. Most of what we watch we can stream over Amazon Prime and Netflix. I just have to discover where to get my soccer fix.
The reason I relate this story involves treating it like a fable—a story with a moral.
I also see much consolidation in the controls and automation market. This is inevitable. It reveals the state of maturity of the market. I used to earn some money consulting with companies about potential acquisitions in industrial instrumentation, control, and automation. The deals have been done. I haven’t had an inquiry for a year.
Check out how ABB, Emerson, and Schneider Electric are all growing through acquisition becoming more viable all-around competitors to Siemens. Look at how the stock prices of Emerson and Rockwell Automation shot up last fall when Emerson was pursuing an acquisition. Rockwell’s board turned down the offer and both stocks dropped. But both stocks have been on quite a rise for the past few weeks. One wonders? That combination would really shake things up.
I have no inside knowledge, and I’m definitely not telling you to rush out and buy stock. However, for all of you who are customers, I’d keep my eyes open and contacts updated.
Companies and organizations band together to develop open platforms to drive manufacturing technology use cases forward. I’ve received notice of two more announcements from Hannover. The problem as I see it lies in the proliferation of these alliances.
Everyone says they want to be open and attract everyone. However, someone is always driving these organizations. Evidently competitors don’t want to sign in with each other. So, they go off and start another one. With any luck, each platform will construct open connectors such that the broader industry will be served.
Note to my American readers—there is a decidedly European flavor to these announcements. Many American companies seem to have a “go it alone” mentality shunning collaboration and open standards. It will take pressure from their customers to get them to open up to the new world.
In this post, I’ll take a quick look at the Open Manufacturing Platform and the Open Industry 4.0 Alliance.
Microsoft and the BMW Group launched the Open Manufacturing Platform, an initiative to drive open industrial IoT development, help grow a community to build future solutions and enable faster, more cost-effective innovation in the manufacturing industry. The OMP is the latest step in Microsoft’s commitment to the advancement of innovation in the manufacturing space by enabling open platforms. The new community is being formed now and will support the development of smart factory solutions shared by OMP members and partners. The Advisory Board is expected to be set up with four to six partners by the end of 2019.
Built on the Microsoft Azure Industrial IoT Cloud platform, the OMP is designed to:
· Provide community members with a reference architecture with open source components based on open industrial standards and an open data model.
· Foster collaboration with community members and partners who will have the capability to develop their own solutions and services while maintaining control of their data.
· Address common industrial challenges such as machine connectivity and on-premises systems integration.
Microsoft will also continue its longstanding work with SAP and other partners in the Open Industry 4.0 Alliance, also announced today, further supporting industry collaboration now and into the future.
The Open Manufacturing Platform is an open industrial IoT platform to accelerate production and logistics optimization efforts.
- Data standardization across data producers for faster insights correlation
- Central auditability and dashboards
- Data monetization opportunities through controlled sharing and ownership
- Open source for OMP components
- Community approach ensures requirement prioritization. All partners contribute and can shape the future of the platform, focusing on common industrial use cases and challenges.
An alliance for the IIoT
At the Hannover Messe 2019 trade fair, seven leading suppliers from mechanical engineering, industrial automation and software announced the foundation of the Open Industry 4.0 Alliance. With this cooperation, the companies want to overcome proprietary solutions and give a decisive boost to the digital transformation of the European industry.
Founding members of the alliance are Beckhoff, Endress+Hauser, Hilscher, ifm, KUKA, Multivac and SAP. In principle, the alliance is open to all companies. Balluff, Gebhardt, Pepperl+Fuchs, Schmidtsche Schack, Samson and WIKA have already joined the alliance as members. All companies are mutually committed to the creation of a standardized and open ecosystem for the operation of highly automated factories and process plants with the integration of logistics and services.
“The open architecture of the Open Industry 4.0 Alliance meets all the requirements of the process industry,” emphasized Matthias Altendorf, CEO of the Endress+Hauser Group. “It is based on standards, ensures transparency across all business processes and guarantees the integrity of the systems. This enables process plant operators to leverage the potential of digitalization.”
The alliance members are planning to realize a so-called Open Industry 4.0 Framework based on existing standards such as I/O Link, OPC UA and RAMI for the entire route from objects in the workshop to services. Customers can choose from a modular system of compatible and scalable solution and service components, such as digital services from Endress+Hauser’s Netilion IIoT ecosystem.
The connection to the SAP software portfolio ensures the integration of a company’s business processes as well as collaboration with partners across company boundaries. The open architecture allows the simple connection of further system landscapes.
In a bit of a surprise to us outsiders, the Board of Directors of ABB and its CEO Ulrich Spiesshofer (55) have mutually agreed for him to step down from his role, which he has held since 2013. The Chairman of the Board, Peter Voser (61), will become interim CEO in addition to his current role, with immediate effect. An official search to find a new CEO has been initiated.
Spiesshofer accomplished much in his tenure. He slimmed the company emphasizing the most profitable divisions. He assembled a good team with great focus. However, as I was contemplating only last week, the stock price has languished for years despite the work. I guess even in Europe the price of stock matters most.
Peter Voser: “On behalf of the Board and the employees of ABB, I would like to personally thank Ulrich for his dedication and commitment to ABB’s customers and employees not only as CEO but also in other executive roles at ABB since 2005. Under his leadership, ABB has been transformed into a global technology leader focused in digital industries. He strategically repositioned the company and built up growth momentum across all businesses. We wish him all the best for his future endeavors.”
Voser added: “We will continue to focus on implementing ABB’s strategy and delivering value to all our stakeholders. To achieve our key financial targets, we will proceed with the divestment of ABB’s Power Grids business as planned, simplify the organizational structure of the group and deliver cost savings. Finally, our four new leading businesses will be fully dedicated to meet our customer needs for digitalization, electrification, automation and robotics.”
Ulrich Spiesshofer: “After 14 years of “all in” dedication and commitment to all our employees and customers, I hand over to Peter a trimmed ABB ship that is on a clear course and gaining speed. I would like to warmly thank our colleagues around the world, customers and partners as well as the Board of Directors for the opportunity to serve this fine company for nearly one and a half decades in different roles in the Executive Committee and as CEO. I will now take some time out before deciding on the next chapter of my professional life. From the bottom of my heart, I wish ABB’s global team all the very best for its future.”
Peter Voser, a Swiss citizen, has been Chairman of ABB since April 2015. Prior to this, he was CEO of Royal Dutch Shell from 2009-2013, and CFO between 2004-2009. Between 2002 and October 2004, he was CFO of ABB and a key leader behind the successful turnaround of the company. Voser also brings a wealth of experience in board positions in leading companies such as a Roche, IBM, Catalyst, Temasek Holdings and PSA International in Singapore.
ABB will hold its Annual General Meeting on May 2, 2019, in Zurich, as planned.